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Condo-HOA Blog

Insurance Industry Responds, and Owners May Pay the Price

Events of casualty damage, even when some of the damage is covered by an association’s insurance policy, can be very expensive for condominium and homeowners associations, primarily because association insurance deductibles are typically tens of thousands of dollars per claim.  The deductible expense is really just the portion of the cost to repair that is not covered by insurance, and is often a common expense paid by all owners.  Whether an association can pass that expense—often the amount of the association’s deductible—directly to the owner who caused the damage, or to the owners whose units were damaged, often depends on the provisions of an association’s recorded declaration.

Numerous associations have amended their governing documents to include language requiring the owners of units involved in the claim (either by causing the damage, or by sustaining damage)to pay for the amount of damage up to the association’s deductible, as well as other uninsured amounts.

In fact, based upon advice from experienced brokers and community association insurance professionals, associations characterized uninsured amounts, including the association’s insurance deductible, as a “loss assessment” to be paid by the impacted owner(s).  Ideally, the owners would turn around and file a claim under their HO6 insurance policy, pay a deductible that was at most a couple hundred dollars, and the HO6 insurer would provide coverage for the loss assessment.  The arrangement seeks to place responsibility for uninsured damage under the association’s policy with the at-fault or affected parties, who could, in turn, rely on their own insurance for coverage to cover these amounts.  Associations benefit by avoiding large common expenses, and owners protect themselves by limiting their out of pocket expenses for the association’s deductible by obtaining their own insurance respecting their units.

In response, HO6 insurers have started to eliminate or drastically roll back the individual unit coverage described above.  Recently, we were made aware of the following language in an HO6 policy issued by a major insurer: “We will not pay more than $1,000 of your assessment per unit that results from a deductible in the insurance purchased by the association of property owners.”  In other words, an owner who has a policy with this language, who is assessed the cost to repair damage not covered by their association’s insurance (i.e., the association’s deductible), may be required to pay thousands and thousands of dollars as a result of this change.

From a condo or homeowners association’s perspective, these changes are an opportunity to encourage owners to know what is in their HO6 policies.  The mechanisms of the governing documents will be carried out regardless of whether owners’ policies have this new limitation or not, and they will be charged with the association’s deductible and potentially other uninsured amounts.  Proactive associations will begin a conversation with their owners on how repair costs are allocated, what insurance looks like, and use it as an opportunity to encourage owners to evaluate who they purchase insurance from.

If your association needs assistance with insurance issues, whether related to deductibles or anything else, Barker Martin has assisted dozens of association in Washington and Oregon with their insurance matters, and is here to help. 

Insurance Industry Responds, and Owners May Pay the Price

Events of casualty damage, even when some of the damage is covered by an association's insurance policy, can be very expensive for condominium and homeowners associations, primarily because association insurance deductibles are typically tens of thousands of dollars per claim. The deductible expense is really just the portion of the cost to repair that is not covered by insurance, and is often a common expense paid by all owners. Whether an association can pass that expense—often the amount of the association's deductible—directly to the owner who caused the damage, or to the owners whose units were damaged, often depends on the provisions of an association's recorded declaration. read more

Last Minute Budget Advice for Washington Communities

By now, many communities in Washington will already have prepared, and maybe even had budgets approved, for 2019, but we wanted to get in one last reminder that because WCIOA's budget section applies to all condos and HOAs, your budget may be a little different this year, and you may have a little explaining to do at the budget ratification meeting. But whether the application of the WCIOA budget provision at RCW 64.90.525 is simple or not depends upon whether you are working with an HOA or Condo. Below are some highlights of the differences you may have to explain to owners. read more

The Insurable Interest Vortex

There is a roadside attraction in Oregon called the Oregon Vortex, where purported paranormal forces cause a number of optical illusions and oddities. It is definitely on my bucket list of Pacific Northwest attractions I want to visit. I have, however, made several visits to what I call the "Insurable Interest" vortex. While I doubt paranormal forces are at work with this vortex, it is worth a word of warning. read more

Foreclosure: Judicial vs. Non-Judicial

In both Washington and Oregon, community associations that have lien rights for nonpayment of assessments have two options when considering foreclosing on units or lots: judicial or non-judicial foreclosure. Whether a foreclosure is judicial or non-judicial is significant as each have their own processes, procedures, and timelines for terminating the owner's ownership interest in the property. read more

Water Damage: Do You Have A Plan? and Have You Communicated the Plan?

Water events are common. Roof leaks, window failures, plumbing leaks, failed hot water tanks and dishwasher melt downs are going to happen. The only question is when. Sometimes the problem is discovered immediately and sometimes a leak can be hidden, resulting in significant damage prior to discovery. read more

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